If a Jersey Mikes franchisee who is a business entity transfers ownership interest, what documentation must be delivered to the franchisor?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
- b. If Franchisee is a Business Entity (defined in Section 31), Franchisor will consent to Ownership Interest Transfers among Fr anchisee's original Principals and waive payment of a Transfer Fee and its right of first refusal under Section 19.7 if the Transfer does not result in a Transfer of a Controlling Interest. The transferor shall deliver to Franchisor such doc umentation and information concerning the Ownership Interest Transfer and the resulting ownership of Franchisee as Franchisor may request. The required documentation will include, without limitation, a Guaranty and Assumption of Obligations signed by each Principal who has not previously signed such documents.
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
According to Jersey Mike's 2025 Franchise Disclosure Document, if a franchisee is a business entity and seeks to transfer ownership interest, the transferor must provide documentation and information about the transfer and resulting ownership to Jersey Mike's as they request. This documentation includes a Guaranty and Assumption of Obligations signed by each principal who has not previously signed such documents. This requirement is waived if the transfer is among the franchisee's original principals, does not result in a transfer of a controlling interest, and the transfer fee and right of first refusal are waived.
This means that Jersey Mike's maintains control over who becomes an owner in a franchise location, even if the franchisee is a business entity. The documentation ensures that all principals are bound by the obligations of the franchise agreement. The Guaranty and Assumption of Obligations legally binds the new principals to the existing franchise agreement, ensuring they are responsible for upholding the terms and conditions.
For a prospective franchisee, this highlights the importance of understanding the ownership structure of their business entity and the implications of future ownership changes. It is crucial to maintain clear records of who the original principals are and to understand the process and requirements for transferring ownership interests to avoid delays or complications. The franchisee should be prepared to provide comprehensive documentation to Jersey Mike's during any ownership transfer to ensure compliance with the franchise agreement.